Standard Chartered booked a robust 46% leap in annual profit; however, warned a vital earnings target would take longer to fulfill as the coronavirus outbreak adds to headwinds in its main markets of China and Hong Kong.
The epidemic could result in a rise in bad loans, it said; however, it didn’t provide specific steering on the potential impact. Competitor HSBC Holding stated last week it may face loan losses of as much as $600 million if the virus epidemic persists into the second half of the year.
Noting that lower rates of interest had been putting stress on net interest income, StanChart said it could take longer to achieve its target of a 10% return on tangible equity beforehand targeted for 2021.
The bank, which makes the majority of its revenue in Asia, posted a pretax profit of $3.7 billion for last year. Though that was slightly below an average estimate of $3.9 billion, it highlighted the steepest profit growth since 2017 when the bank recorded a six-fold increase.
Hong Kong’s economy has been struck hard, first by anti-government demonstrations and now by the coronavirus as tourist arrivals dip and residents keep away from shops.
The bank stated its provisions for anticipated losses from Hong Kong bad loans surged by $46 million in the H2 2019.
Analysts and bankers have notified that lenders, which derive a large part of their earnings from Hong Kong, face at least two-quarters of falling asset quality and slowing loan development as the virus pandemic strikes trade and consumer banking.
StanChart further mentioned it had approved a buyback of as much as $500 million worth of shares beginning shortly and will evaluate the potential for making a further capital return upon the execution of the sale of a holding in Indonesian bank Permata.
Its Hong Kong stocks prolonged morning gains to be up 2.5% in the afternoon trade after the outcomes.